Why the Appen share price gained 53% in the first half of 2020

Here's why the Appen Ltd (ASX: APX) share price was up 53% over the first half of 2020. What's next for this WAAAX high flyer?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Appen Ltd (ASX: APX) share price has been on fire over the first half of 2020, despite the massive share market crash in March.

Across the first half of the year, the Appen share price rose from $22.18 on 2 January to $33.92 per share on 30 June. That's an appreciation of 52.93% – not bad for 6 months' work. Since 30 June, Appen shares have climbed even higher and are sitting at $35.93 at the time of writing – adding another 5.9% since the start of the new financial year. Considering the S&P/ASX 200 Index (ASX: XJO) is still down around 11% year to date at the time of writing, it's a fantastic result for Appen shareholders.

Appen is a human dataset specialist. In laypersons terms, it harnesses data about how we humans speak and communicate and puts it in a form that computers can understand and learn from to develop better artificial intelligence (AI). It's companies like Appen that help virtual assistants like Apple's Siri and Amazon.com's Alexa better communicate with us in more natural ways. 

So, what's behind this dataset company's stellar year so far?

What's been moving Appen share price this year? 

The Appen share price did take a tumble in the broader market crash that hit us in March and April, falling from around $27 in mid-February to a low of $15.70 in mid-March. But it didn't take long for Appen shares to recover, with the stock almost doubling from its March lows by early May. In fact, Appen made a new all-time high of $37.12 just last week.

In my view, the success of the Appen share price this year (so far) has been two-fold. Firstly, Appen is a company whose earnings look to be relatively unaffected by the coronavirus pandemic and associated lockdowns. Appen doesn't release a list of its clients, but it's pretty safe to assume that it has worked (or works) with most of the biggest tech names in the world – think Apple, Alphabet, Facebook and Amazon, to name a few. These companies are not likely to cut down on their research and development (R&D) budgets this year or going forward, in my opinion, meaning these valuable revenue streams for Appen are likely to remain open.

Secondly, the company is sitting in a powerful tailwind of AI investment. Appen acquired the US-based Figure Eight last year, which has a strong position in both the government and not-for-profit sectors. Spending by these groups on AI research and services is set to expand rapidly in the years ahead. This should prove a boon to Appen. The company noted as much in its May annual general meeting, telling investors the US government has around US$5 billion earmarked for AI spending in its budget. It also noted that globally, overall AI spending is growing at an average rate of 28% per annum. That's a pretty nice slipstream to reside within.

Foolish takeaway

Appen looks to be extremely well placed for growth and minimally exposed to any complications from the coronavirus pandemic. In my view, it's these 2 factors that have been fuelling Appen's share price growth over the first half of 2020.

Right now, the Appen share price looks relatively fairly valued to me, if not a touch expensive. But if the company's shares dipped again, it might be a great chance to pick up this forward-facing company for your ASX portfolio.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Smiling woman looking through a plane window.
Travel Shares

Qantas share price hits 52-week high despite new legal probe

The NZ regulator will shortly file proceedings.

Read more »

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Share Gainers

Why Austal, Core Lithium, Origin Energy, and Sayona Mining shares are storming higher today

These shares are having a strong session on hump day. But why?

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Broker Notes

3 dominant ASX 200 shares just upgraded by top brokers

Top brokers have upped their ratings for these three dominating ASX 200 shares.

Read more »

Three guys in shirts and ties give the thumbs down.
Share Fallers

Why Actinogen Medical, Flight Centre, JB Hi-Fi, and NextDC shares are falling today

Let's see why these shares are out of form on hump day.

Read more »

A female stockbroker reviews share price performance in her office with the city shown in the background through her windows
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

Girl and her grandmother sharing a hug on the porch
Opinions

2 ASX stocks to buy and hold for the long run

I think these two stocks are long-term winners.

Read more »

Business woman watching stocks and trends while thinking
Share Market News

5 things to watch on the ASX 200 on Wednesday

Will the local market hit a new record high today? Let's find out.

Read more »

A neon sign says 'Top Ten'.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another day, and another record high for the ASX 200 this Tuesday.

Read more »